Becton, Dickinson and Company (BDX)

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Becton, Dickinson and (BDX)

Q1 2013 Earnings Call

February 05, 2013 8:00 am ET

Executives

Monique Dolecki

Vincent A. Forlenza - Chairman, Chief Executive Officer and President

Suketu Upadhyay - Acting Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Controller

Tom Polen - President

William A. Kozy - Chief Operating Officer and Executive Vice President

Analysts

David H. Roman - Goldman Sachs Group Inc., Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

David R. Lewis - Morgan Stanley, Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Amit Bhalla - Citigroup Inc, Research Division

Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Brian Weinstein - William Blair & Company L.L.C., Research Division

Jonathan P. Groberg - Macquarie Research

Lawrence S. Keusch - Raymond James & Associates, Inc., Research Division

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

William R. Quirk - Piper Jaffray Companies, Research Division

Eric Criscuolo - Mizuho Securities USA Inc., Research Division

Matthew Taylor - Barclays Capital, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Richard Newitter - Leerink Swann LLC, Research Division

Presentation

Operator

Hello, and welcome to BD's First Fiscal Quarter 2013 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through February 12, 2013, on the Investors page of the bd.com website or by phone at (800) 585-8367 for domestic calls and (404) 537-3406 for international calls, using conference ID 87420149. [Operator Instructions] Beginning today's call is Ms. Monique Dolecki. Ms. Dolecki, you may begin your conference.

Monique Dolecki

Thank you, Jackie. Good morning, everyone. Thank you for joining us to [ph] first fiscal quarter results. As we reference in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at bd.com.

During today's call, we will make forward-looking statements, and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our first fiscal quarter press release and in the MD&A sections of our recent SEC filing.

We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedules, is posted on the bd.com website.

Leading the call this morning is Vince Forlenza, Chairman, Chief Executive Officer and President. Also joining us are Suky Upadhyay, Senior Vice President, Corporate Controller and acting Chief Financial Officer; Bill Kozy, Executive Vice President and Chief Operating Officer; and Tom Polen, President of Diagnostic Systems.

It is now my pleasure to turn the call over to Vince.

Vincent A. Forlenza

Thank you, Monique, and good morning, everyone. As we stated in our press release, we're off to a good start this year, and we're pleased with our performance in the first fiscal quarter. Overall, revenues and EPS were solid. At the end of December, we completed the acquisition of Safety Syringes, Inc. or SSI. SSI specializes in the development of anti-needlestick devices for prefilled syringes and will be reported in our Pharmaceutical Systems business unit within BD Medical's -- BD's Medical segment.

Growth in the first quarter was driven by our Medical and Diagnostic segments. Revenue growth was partially aided by an early flu season and favorable comparisons to the prior year period. In our Bioscience segment, we saw solid growth, which was driven by improved instrument placements in the U.S., as well as favorable comparisons to last year.

We also saw strong continued growth in international Safety sales and emerging markets. As we've been discussing with you for some time now, we have spent the past 2 years making significant strategic investments in our business in the backdrop of a challenging macroeconomic environment. When we provided our full year guidance in November, we expected to see solid revenue growth, margin expansion and underlying double-digit earnings growth, excluding the medical device tax. Our underlying business performance for the first quarter demonstrates that our strategy is delivering results and gives us the confidence to raise the bottom end of both our revenue and EPS guidance ranges. Suky will provide more details on our fiscal year 2013 outlook later in his remarks.

On Slide 5, we've outlined our first quarter revenue and EPS results, which I will speak to on a currency-neutral basis. The total company revenues were solid, increasing by 5.2%. Fully diluted EPS came in at $1.35, growing at 15.8% over the prior year.

Now I'd like to turn things over to Suky for a more detailed discussion of our first quarter financial performance.

Suketu Upadhyay

Thank you, Vince, and good morning, everyone. I'd like to begin by discussing the key financial highlights for the first quarter. As Vince just stated, our results were ahead of our expectations, with Medical and Diagnostics driving solid growth for the company. This quarter, we also saw an improvement in our Biosciences segment. After normalizing for the flu, favorable comparisons and acquisitions, our first quarter underlying revenue grew at the upper end of our previous guidance range.

As a reminder, when we talk about our acquisitions this year, we are referring to KIESTRA, Sirigen and SSI. Accuri and Carmel Pharma have annualized and will now be included in our base going forward.

In the quarter, we saw strong gross margin expansion of 200 basis points, which led to improved operating margin expansion of 220 basis points. We are on track to meet our goal of about 50 basis points of underlying operating margin expansion for the fiscal year.

Additionally, during the quarter, we completed about $300 million of our $500 million share repurchase plan for FY 2013. As Vince also mentioned, our first quarter results gives us the confidence to raise the bottom end of our currency-neutral revenue and EPS guidance ranges. Given a stronger euro, we're also raising our reported revenue and EPS outlook while also tightening the range. I'll provide more details around our outlook later in the call.

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